An insolvent company is one that is unable to pay its debts when they fall due for payment.
The three most common external administrations are:
How does insolvency affect me?
Shareholders rank behind creditors in a liquidation, although in some circumstances they can claim as a creditor. As a shareholder, limited information is received from the external administrators of insolvent companies.
If a company is placed into administration or liquidation, shareholders cannot transfer shares in the company without permission from the external administrator or the Court.
As a shareholder of an insolvent company, you can realise a capital loss in certain circumstances:
if a liquidator or deed administrator makes a written declaration that they have reasonable grounds to believe there is no likelihood that shareholders will receive any further distribution in the winding up, or
if no such declaration is made by the liquidator, the deregistration of a company at the end of the liquidation also enables realisation of any capital loss.
You may wish to seek tax advice about your ability to realise a capital loss if you hold shares in a company which has been placed in voluntary administration or liquidation.